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According to the Financial Times, at least a dozen Chinese companies failed to meet the deadline to file their annual results with exchanges in the United States. These delays have exacerbated concerns pertaining to the management capability of these firms and the potential for fraud within them.
There’s a fresh scandal brewing for the troubled Chinese small-cap sector as annual earnings reports come in over the weeks ahead.
LDK Solar Co., Ltd. (LDK, quote), a leading Chinese manufacturer of photovoltaic products, today revised its guidance for the fourth quarter of 2011. Additionally, the Company announced that it will report financial results for the quarter before the market opens on Thursday, April 12, 2012. The company will host a corresponding conference call and live webcast at 8:00 a.m. Eastern Time the same day.
The solar energy industry had plenty of problems in 2011, and analysts at Needham & Company say 2012 will be a “very challenging” period of slow consolidation.
In a recent joint statement issued by the Ministry of Commerce and the National Development and Reform Commission, Beijing is encouraging foreign investment in designated sectors, including alternative energy, biotechnology, information technology and advanced materials.
Chinese solar stocks have been taking a beating in the wake of a U.S. probe into dumping, and analysts warn that the pain isn’t over yet.
LDK Solar, one of the biggest Chinese ADRs and also one of the biggest names in silicon-based solar power, is probably going to pop overnight in Shanghai.
LDK (quote) blasted through consensus of 22 cents a share by reporting a second-quarter EPS of 36 cents.
Revenue was also well above forecasts, coming in at $565 million versus expectations of $461 million.
A year ago, LDK was suffering in the backwash of the recession and global silicon shortages. Now that silicon is cheap again, the company seems to be booking business hand over fist as China and other countries rush to deploy solar systems.
Even better, LDK raised its guidance on the current quarter, where it now expects revenue to edge up to $570 million to $600 million. Once again, analysts were only looking to see $422 million in revenue, so this is potentially spectacular.
The China ADR list is full of solar companies ranging from giants like LDK to more obscure plays. Nonetheless, the bellwether’s triumphant earnings are going to boost the whole group: Solarfun Power Holdings (SOLF, quote), JA Solar (JASO, quote), Trina Solar (TSL, quote), Suntech Power (STP, quote), Yingli Green Energy (YGE, quote).
Last week’s mixed global macro data should continue to support emerging markets this week, but what are the news triggers that traders will be watching?
While our favorite economies in Asia, Latin America and Eastern Europe are still chugging along, they each remain fairly reliant on the health of the G3 to keep their growth trends on track.
U.S. numbers (NFP, jobless claims, housing starts) remain sluggish but European data (factory orders and especially outstanding German PMI) signal that times are better in the land where a few months ago we all thought the dreaded “Black Swan” had come to roost. The ECB meeting confirmed that Europe is climbing the worry wall and despite austerity talk should continue to support global expansion.
Commodity prices remain supportive. We expect to see continued evidence that iron ore and steel prices in Asia are firming. Last week’s comments from RTP (quote) and Russia’s Norilsk (NILSY, quote) tell me end demand is there.
Valuations are far from stretched. Although emerging markets retail and consumer names are usually relatively insulated from the global macro cycle, they also look like the most vulnerable trades right now. Stay focused on value and free cash flow generation when you play the emerging cellular companies like VIP (quote), CHA (quote) and CHU (quote), not to mention the frontier communications giant MICC (quote).
Next week we get more follow-though in Europe on industrial production. The U.S. markets will of course focus on this afternoon’s Fed policy meeting and then the consumer inflation and retail sales numbers on Friday.
In emerging markets, keep looking for a whole bunch of data to come out of China. July CPI and PPI numbers come out tonight and should steal the spotlight from retail sales and industrial production releases.
Inflation is really the big topic in China right now. If inflation remains significant, there is not much chance Beijing will relent on its recent lending curbs. But if prices look stable, there is a chance we may see the more supportive policy environment that China bulls are hoping to get.
And of course it’s still earnings season. Big emerging markets releases to watch include TTM
(quote) and LDK (quote) today, PBR (quote) and a bunch of Brazilian utilities tomorrow, brewer ABV (quote) Thursday and Ambassador favorite FBR (quote) on Friday.
Shares throughout the world’s emerging markets are bouncing today, but China’s solar industry is leading the pack as euphoria over Europe combines with solid earnings news.
Solar wafer fabricator ReneSola (SOL) reported a first quarter profit that beat consensus by 5 cents a share and gave investors encouraging guidance on pricing trends in the forward half of the year.
Since environmentally conscious Europe is a key market for solar equipment makers, news that the EU is committing up to $1 trillion to keep Greece from turning into another Lehman Brothers is also boosting solar stocks.
Beyond SOL, LDK Solar (LDK), Yingli Green Energy (YGE) and Suntech Power (STP) are all up 7% to 10%:
